Stateline Western Australia

Health costs strain State budget

TOM BADDELEY: Unlike the two previous State Government Budgets, the third delivered by Treasurer Eric Ripper has been subjected to strong criticism. Mr Ripper has blamed the health system for yet another hit on the purse strings of the average West Australian -- increases in taxes and charges his party promised would not happen. Treasurer, thanks for your time.

ERIC RIPPER: Thanks very much, Tom.

TOM BADDELEY: For the third year in a row, you've broken your pre-election commitment not to increase taxes and charges.

ERIC RIPPER: I really regret those increases in taxes, but I want to say this. Every single dollar that we've raised - and more - is going into the health system. $1000 million over four years - that's a very important commitment to the number one community priority.

TOM BADDELEY: But isn't throwing money at Health the easy option? I mean, I think it represents 25 per cent of the Budget now -- by your own estimates, 35 per cent pretty soon. Why not reign in the Health bureaucracy instead of dipping your hand deeper and deeper into the till? When does it stop?

ERIC RIPPER: Well, throwing money to Health is certainly not easy because we've had to constrain expenditure right across the rest of the public sector and we've had to raise taxes. So it's not easy, but it is essential. But it's got to be coupled with reform -- investment plus reform is what we're about, because if we don't reform the health system, then it won't be sustainable into the future. We want to ensure that quality health services will be delivered in 2007, just as we aim to deliver them in 2004.

TOM BADDELEY: So you've got a solution for Health? We won't see this, time and time again, saying, "Sorry about the increase, we've just got to fix that ever-hungry Health Budget"?

ERIC RIPPER: We've budgeted for a 6 per cent increase in Health expenses this year and next year. Lower increases in subsequent years as a result of the work of a reform committee chaired by Professor Mick Reid, who was the Director-General of Health in NSW. So we're putting a lot of store on the need for reform.

TOM BADDELEY: The Court Government had a similar review and it didn't change anything.

ERIC RIPPER: Well, this is not just a review. This is a reform program. The committee will actually be superintending reforms to take place. So we're not going to have a report which sits on a shelf which may not be implemented. It's a reform program.

TOM BADDELEY: So what you're saying is, ultimately, this gobbling -- this hungry Health animal will no longer take control of the Budget distribution?

ERIC RIPPER: Well, we've got to move to that position because it's not sustainable otherwise. We don't want a situation where Health is 35 per cent of the State Budget and we're cutting $1 billion a year from other services or we're trying to raise $1 billion extra in taxation. That can't happen and we need to ensure that change takes place so that we get best value for the extra dollars that we're putting into the health system.

TOM BADDELEY: However hungry Health is next year, I bet you don't increase taxes and charges next year in the lead-up to the election.

ERIC RIPPER: Well, I never want to increase taxes and charges. It's always the last option for us. We focus on cutting expenditure. We've got $750 million worth of savings across the forward estimates as a result of the work we've done for smarter buying by the Government and for more efficiency in the way we run things like payroll systems and human resource management.

TOM BADDELEY: How do you justify on the one hand hitting householders again and on the other hand coming up with a surplus of $83 million?

ERIC RIPPER: Well, the surplus is actually spent. It's a source of funding for our capital works program. We're spending $3.5 million on ports, roads, bridges, power stations --

TOM BADDELEY: So we don't have a surplus?

ERIC RIPPER: Well, it's a source of funding for our capital works program. It's a surplus on the day-to day operating expenses, but what it does is help us fund the capital works -- the roads, the power stations, the transmission lines, the bridges, the ports, that underpin the economic growth of the State -- the schools, the hospital emergency departments, and so on.

TOM BADDELEY: So what do you mean by that? I mean, do we not have a surplus, or do we have a deficit?

ERIC RIPPER: Of course we have a surplus, but the surplus is not money in a jar which is not being spent. It's devoted to the capital works program.

TOM BADDELEY: You've jacked up real estate stamp duty again -- up by 15 per cent this time. When does that stop?

They just keep getting hit again and again.

ERIC RIPPER: Well, we've got three ugly sisters as our State tax possibilities -- payroll tax, land tax and stamp duty. We've got a decline in Commonwealth grants. 45 per cent of our revenue comes from the Commonwealth. That's rising by only 0.9 per cent -- way below the inflation rate. We've got a fall in our mineral royalties -- $131 million cut in our mineral royalties. So we've got to do something in order to fund important community services. It's the only responsible reaction to the circumstances faced by the Government.

TOM BADDELEY: State debt is becoming another big worry -- up $1 billion from last year. You're starting to look more and more like a Labor Government of the 1980s.

ERIC RIPPER: We're certainly not going to look like that. We are managing our debt within responsible limits. But we are building important public works, like the south-west railway to Mandurah, like the port works, the schools, the hospital emergency departments and the police stations. That's what those borrowings, that's what that debt funds.

TOM BADDELEY: But that AAA rating, Treasurer, is now at risk -- much greater risk.

ERIC RIPPER: No, it's not at risk because we've kept the debt-to-revenue ratio below the cap of 47 per cent and the ratings agencies have confirmed that this Budget is consistent with the maintenance of the AAA credit rating.

ERIC RIPPER: They always say that, but what they also say is the Budget is consistent with the AAA credit rating.

TOM BADDELEY: It wouldn't take then, though, much to push it beyond that benchmark you've created of 47 per cent. Like a blow-out in the Mandurah rail link which everybody thinks will happen.

ERIC RIPPER: Well, we've got to manage it all very carefully and that's what we do. We've done that in two Budgets so far. And we intend to do it and deliver the Budget outcome that we forecast this year.